Is Extended-Hours Trading Indicative of Subsequent Returns?

Published in THE JOURNAL OF INVESTING, Spring 2018 edition, Vol. 27, Issue 1:
  • A new academic study by professors from four esteemed universities applied News Quantified’s unique data to conclude that, when crucial financial news is released during extended stock market hours, returns are positively and appreciably associated with subsequent main trading session returns.
  • In contrast, the researchers found that, when extended-hours trading does not include the release of important news, the returns are weakly and negatively associated with the following main trading session returns.
  • Crucial corporate news is often released outside of the regular trading session. Extended evening hours are from 4:00 p.m. to 8:00 p.m. ET, and pre-market trading hours are from 4:00 a.m. to 9:30 a.m. ET.
  • The research was conducted by Dr. Shari Levi, assistant accounting professor at the Tel Aviv University School of Management; Dr. Joshua Livnat, professor emeritus of accounting at New York University’s Stern School of Business and managing director at Quantitative Management Associates; Dr. Li Zhang, assistant accounting professor at Rutgers Business School; and Dr. Xiao-Jun Zhang, professor of accounting at the Haas School of Business, UC Berkeley.

  • Dr. Livnat notes, "The data supplied to us by News Quantified reduced data collection efforts immensely, and enabled us to perform rigorous tests of how extended market trading incorporates new information into prices, and how these market reactions can predict future returns.